Comments on: First Time Home Buyer’s Guide To Fixed Rate Mortgages

By: Bryan

Bryan — Tue, 14 Jul 2009 15:08:49 +0000

The article was worthless in that it offered no alternatives to the FRM, and outdated interest rates.
The average length of time someone keeps a mortgage is just over 4 years, the average length of time people stay in a house is 7 years. So the longer the mortgage, the better!
@Andrea – I am a big believer in Interest only mortgages because 1. you have control of your money, 2. you get a bigger tax deduction, 3. your money is not being invested in “equity” which is a horrible place to keep your money, 4. for the first 4 to 7 years of a FRM, you are mostly paying interest anyway. Any mortgage is an informed decision. ARM’s and Interest Onlys are excellent choices in certain situations, but they are not for everyone.
@Chris – the hybrid ARM seems to be some sort of Interest Only loan. That’s the only way you pay interest on what you owe. Interest Only Loans are great tools but one has to really understand them, have a plan around them, and be disciplined to take full advantage of them. Most “hybrid” loan products have a unique purpose. Unfortunately unknowing or unscrupled mortgage people used them to qualify otherwise unqualified people for mortgages.
Be informed, be smart and make sure the person offering you a mortgage loan truly has your best interest (short and long term) as their top priority.

By: Chris

Chris — Sat, 04 Jul 2009 19:43:14 +0000

I have a question that I hope someone can answer for me. A few days ago I had a guy come to my house trying to sell me a hybrid ARM loan. He claimed that a FRM makes you pay the interest on the orignal amount throughout the life of the loan, while this ARM only makes you pay interest on what you owe. Is this true? I have a 260,000 loan. So am I paying interest on $260,000 every month or am I paying interest only on the amount I still owe on the principal? His statement doesn’t make sense to me.

By: Dave

Dave — Thu, 11 Jun 2009 11:50:31 +0000

What I was saying was not a very great investment, but they lucked out good on interest, they had a 4.25% for 20 years. they made money by not paying it off early, just keeping savings accounts

By: Rebecca Rivera

Rebecca Rivera — Wed, 10 Jun 2009 20:51:17 +0000

For Dave #7 comment, even if your mom put $40,000 in a cd in the 70’s she still would have paid to live somewhere, so that doesn’t compare.

The best option is to get a 30 year fixed rate mortgage but pay it like it is a 15 year loan (make sure you have no prepayment penalties.) This way you will have it paid off in 15 years saving lots of interest, but if times get tough you have the option of more payments. This also means to buy less than you can afford. Then in 15 years you can live in the home mortgage free or sell to upgrade to a larger place.

By: Spike

Spike — Wed, 10 Jun 2009 18:07:03 +0000

Hmm . . . yeah, I remember when I and my husband bought our first residence (a condominium) on a fixed-rate mortgage, and I looked to see how much we’d REALLY pay over the life of the 30 year loan.

After I picked myself up off the floor, I checked the fine print in the contract. No pre-payment penalties, huh? Okayyyy . . .

So we saved our pennies and paid extra on the PRINCIPAL every month. $50 here, $100 there. We cut our mortgage payments from $500/mo at the beginning to $150/mo seven years later, when we sold the condo to but the current home.

On a fixed rate mortgage. With no prepayment penalties. Making extra payments to the principal each and every month.

Debt is debt, mortgage or otherwise. Interest is interest, regardless of what it’s being charged for. Pay off ALL your debts. And read the fine print.

By: Ivy

Ivy — Wed, 10 Jun 2009 17:18:17 +0000

This couple of paragraphs (I hesitate to call it an article) is almost unreadable and woefully confusing. Not to mention the fact that it doesn’t actually contain, you know, a POINT.

Most home buyers who fall into the trap of the fixed rate mortgage…

Trap? As opposed to what? A variable rate? Renting? A 50-year ARM? What is the message here?

If, as the author says: “Common questions of first time home buyers are “what mortgage is right for me?…”

Then why not actually discuss the options?

Finally, in your comment above, you say “…touched on what I think Jazmin was getting at in the article.”

Dude, if you don’t know what she was getting at then why did you publish it!?

By: Frugal Dad

Frugal Dad — Wed, 10 Jun 2009 17:12:31 +0000

@Lane: I would agree with you – you could really take the “fixed rate” point out of the argument and make it a stance against mortgages. Of course, 100% down plans aren’t feasible for most people, so for me mortgages are sort of a necessary evil these days.

By: Lane

Lane — Wed, 10 Jun 2009 17:02:21 +0000

I agree with all of the comments about a house being a place to live and not an investment.

Unfortunately, I don’t think this was a very good article. It seems that the author’s main point was that people pay a substantial amount of interest over the life of the loan and she chalks it up to the fact that they selected a fixed rate mortgage. Problem is that regardless of whether you finance the house with a fixed rate loan or a variable rate loan you are still going to pay alot of interest if you finance it over 30 years.

By: Dave

Dave — Wed, 10 Jun 2009 15:32:14 +0000

A house is a house,a place to live, not an investment, Plus of buying a house, after 30 years, or how ever long the mortgage is, you stop paying, you still have all the other expenses.
I’m paying $525 a month for my mortgage, 25 years from now I won’t be any more. When I was renting I was paying $485 a month, what will rent be in 20 years?
I plan on living where I am for some time.
If a house is an investment, buy one and rent it out.
My mother is selling her house after 38 years, it cost about $40,000 in 1971. it’s on the market for $160,000. $40,000 doubled twice is $160,000 in 38 years. If they put $40,000 in a 5.5% savings account in 1971 she would have $320,000, just think what CDs were paying in the late ’70s early ’80s.

By: Frugal Dad

Frugal Dad — Wed, 10 Jun 2009 13:00:38 +0000

@Andrea and @Michelle: Miranda touched on what I think Jazmin was getting at in the article. For years we’ve considered home purchases an investment, and to some extent they still can be. But after watching home values plummet in this recession we now know first hand that nothing is a sure thing. Perhaps it is better to think of it as an extended purchase – one that when carried out over 30 years costs far more than the original purchase price. That is the “30 year, fixed rate trap” to me.

@neimanmarxist: 15-year fixed rate mortgages are usually available at lower terms than their 30-year counterpart. One thing to consider is that a 15-year FRM carries a larger payment, so you typically cannot buy quite as much house. Of course, that may be a good thing!

As far as first-time home buyer literature, I would recommend something like Home Buying For Dummies as a great primer on the home buying process. We often write off the “For Dummies” books as overly simplistic, but this one by Eric Tyson is actually quite good as a real estate primer. I believe a 4th ed was recently released on Amazon with more up-to-date information.